Just for those interested in the S&P500 and its relationship to the precious metals sector.

Preamble

Market sectors are interlinked and what boosts one particular sector can put downward pressure on other sectors. We have seen the recent action by the Fed in raising rates and the boosting effect that they have on the US Dollar. A strengthening dollar has an inverse effect on gold and silver and the associated precious metals producers and so gold bugs have suffered accordingly.

The action in the financial markets of the last few days has seen a correction from historic highs as investors decided to take profits and place their investment funds elsewhere. During Thursday’s trading session on the NYSE the DOW Jones was down 545 points, following an earlier fall of some 800 points. The S&P500 also fell in a similar fashion and both indices closed below their respective 200day moving averages.

It should also be noted that the dollar also lost ground despite the recent rate hikes and the stated intention of the Fed to continue with the policy of rate ‘normalization.’ Both of these factors helped gold and silver prices to recover and this in turn saw investors taking a tad more interest in the associated mining companies. The biggest gold producer on the planet, Barrick Gold Corp (ABX) gained 9.39% in Thursdays trading session. In stock market parlance it is unusual for an elephant to sprint but on this occasion, Barrick proved to be the exception to the rule.

Last week was a really interesting week for gold - was it a minor jump or the start of a new rally?

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